Why we need to make social security a Vision 2030 flagship project

By Hosea Kili, Group Managing director, CPF.

Poverty and vulnerability remain major challenges, with almost one in every two Kenyans trapped in a long-term, chronic cycle of poverty.

The Constitution of Kenya (2010) under the article 43 of Bill of Rights guarantees all Kenyans their economic, social, and cultural rights. It asserts the "right for every person...to social security and binds the State to provide appropriate social security to persons who are unable to support themselves and their dependents."  This right is closely linked to other social protection rights, including the right to healthcare, human dignity, reasonable working conditions, and access to justice. Article 21 establishes the progressive realization of social and economic rights and obligates the State to "observe, respect, protect, promote, and fulfill the rights and fundamental freedoms in the Bill of Rights."

From a social security perspective, the challenges include but are not necessarily limited to providing pension, sickness benefits, maternity protection, employment injury and disease protection (workers’ compensation), survivors’ benefits, disability coverage, family benefits, and unemployment protection. At the moment, the existing social protection initiatives include education bursaries, school feeding programmes, fee waivers in public health facilities, Orphans and Vulnerable Children’s (OVC) programme, older persons cash transfer and youth enterprise fund, among others.

Figures from the United Nations Department of Economic and Social Affairs reveal that by 2030, the number of Kenyans aged 60 years and above will rise from 1.6 million currently to about 3.4 million. The ensuing “demographic time bomb” will mean that less is saved for investment both at the family level and nationally, limiting the economy’s capacity to create sustainable jobs. Now is the time for the country to Institute Universal Pension coverage for all citizens through introducing Pension levy on mandatory goods and services to realize mandatory state social security as provided in article 43 of the Constitution.

The Government should look at total income and explore establishing the universal fund by allocating a percentage of the national budget to go into that fund for universal pension and medical.  It could also look at a levy on goods that are vital such as airtime, a small portion of which can be built over time.

Norway for example has used their oil as a source of sovereign fund, which they invest in major projects such as infrastructure funding, low cost housing yet it serves as a source of funds for those who retire. The Universal Fund project should ideally be implemented as a flagship project under Vision 2030 in order to give it the status and attention it deserves.

The existing social protection initiatives are quite disjointed and there is need for a policy review in order to benefit all Kenyans especially the vulnerable ones.  We can apply mandatory national social security saving similar to VAT on products and services for all Kenyans. This can be applied through certain classes of good and services.  

The government should at the same time assess the feasibility of introducing a basic universal grant financed from the national budget that would go into the universal old age pension fund.  If broader reforms to introduce higher mandatory contributions are introduced, the regulatory capacity will need to be correspondingly increased.  The scope can be widened by encouraging innovation in the social security sector through adoption of technology to widen social security coverage and ease of participation by all working Kenyans.  Even if we took the average Kenyan earning a dollar a day and asked them to save at least 10 percent i.e. Ksh 10 per day or ksh 300 per month, we can raise at least Ksh 7.5 billion from 25 million working Kenyans.  

As part of encouraging Kenyans to join, we need to introduce a social security card that will be used as a mandatory document for accessing government services.  The more people participate the bigger the pool and the more successful it will be.

Stringent rules on the investment of mandatory contributions in Pension schemes will be essential to ensure risk free investments and enhance sustainability. Likewise, we will also require stringent regulation on access to the universal pension benefit by pension beneficiaries in order to safeguard the “sacredness of the fund.”

The country with the right structures in place can afford social security.  We are operating below the global savings rate at less than 12 percent. Through such interventions, we should be able to increase this to at least 20 percent national savings while ensuing all Kenyans live a comfortable retirement.

Hosea Kili is the Group Managing Director of CPF and Chairman of the Association of Pension Administrators of Kenya (APAK)

6 Tips on Keeping Yourself Motivated

Companies are continuously trying to motivate employees to perform above target. We end up leading busy lifestyles and it’s easy to suffer burn out, however nobody really wants it to get to that. So how do you keep pace in this helter skelter lifestyle? Through my experience over the years, I have found the following self-motivation tips absolutely helpful to keep me in pace.

1. Plan all the way to the end.
In his book, The 48 Laws of Power, Robert Greene urges us to plan all the way to the end. It is important to start each Day, Month, Year with a clear plan of action. Planning to the end gives us much leverage towards the successful achievement of our objectives. Remember what is not planned rarely gets done.

2. Learn to say NO, more often.
Say no to unplanned meetings which a lot of times you get roped in without prior notice because of your seniority or just because it feels good to have you around. Say no to that colleague who charms you to an early lunch date that definitely ends late costing you valuable time. Offer to instead meet them after 6pm at that Cafe next door.

But how do you deal with that colleague who camps at your desk gossiping for 30 minutes every day!?

Whatever you do don't be rude, I suggest that you learn to multitask while listening to them, be boring company for that moment. Any polite means of shaking them off will do.

3. Maintain a to-do list.
I normally keep a list of 5 key things to do per day and week. A daily to-do list will help focus your attention on key activities and helps you avoid extraneous or redundant ones. An Important inclusion for this list is; when to read and respond to emails as these can be big time wasters.
A weekly planner also helps to prioritize heavier tasks such as report writing and research which need more than a day to accomplish.

4. Exercise regularly each week.
One intense session and two light sessions per week normally works well for most people. Exercise rejuvenates the body, keeps you fit, brisk and mentally agile.

The question is how to create time.

I normally utilize the evening to either have a jog at a local park or hit the gym. For the early birds, the gym is a great option. Bonus gain with both options is that you avoid traffic.

5. Read a good motivational book.
This helps to harness some positive energy and thinking. Rhonda Bane, the author of The Secret, talks about the law of attraction. In essence, whatever you think about you attract to yourself, good or bad. Besides being a source of motivation, good reading also allows you to have some quiet time for meditation, reflection and planning. While still at this juncture may I suggest a great place to start your book exploration: ‘The Power of Habit’ by Charles Duhigg, is a compelling read!

6. Take a power nap more often.
There is some magic that a power nap does to the mind, you can't really explain it, just try it. Additionally, it helps to sleep early; rest cannot be overrated especially for busy executives such as yourselves.

Contributor; Sospeter Thiga BA, MBA, CPA

Sospeter Thiga is a Risk Management practitioner in East Africa and is currently the Group Head of Risk and Compliance at CPF Financial Services Limited with over 12 years’ experience in Risk Management, Strategic Planning and Financial Planning. He is passionate about effective Strategy implementation through adequate Risk Management practice. He holds an MBA in Strategic Management and a Bachelors of Economics from the University of Nairobi. He is a Certified Public Accountant of Kenya.


Underspending in cyber security costly mistake

By Tony Olang, Head, Laser Infrastructure & Technology Solutions, LITES.

Incidences of cybercrime have become increasingly prevalent in Kenya. According to the Kenya Cyber Security Report 2016, Kenya lost Ksh17.8 billion to cybercriminals in 2016, a 14 per cent increase from Ksh15 billion the previous year. The threat level is clearly escalating. With the elevated level of threat, institutions are still grossly underinvesting in cyber security. The report indicates that 96 per cent of firms in Kenya spend Ksh50,000 annually or nothing at all on cyber security.

Underspending in cyber security is creating an opportunity for cybercriminals to wreak havoc, and the abundance of cases involving top government agencies,as well as key private sector players, demonstrates this.

Part of the reason why institutions are not beefing up their cyber security budgets, despite clear evidence that they need to, is because they don’t fully understand the risk of exposure to what a cybercriminal can inflict. We generally lack awareness on mitigating controls or believe that we cannot fall victim to cyber crime.

There is the general misperception that cybercriminals only target financial institutions, and that if we are not a bank, insurance company or financial services provider,we are safe. This is not true though financial institutions are a natural target for cybercriminals because of the prospect of monetary gain. Organisations are all connected through the Internet and with transactions taking place over telecommunication networks, any corporate organization can be a target.

Increasingly, hackers are burrowing through private and public networks to steal or gain access to sensitive information. There is an emergent underground digital economy in which data is a highly priced commodity, incentivizing theft of data.

Data theft has serious consequences, both for governments and individuals. In November last year, for instance, WikiLeaks founder,Julian Assange,published troves of data that portrayed U.S. presidential hopeful, Hillary Clinton, as a key backer of an insidious plan that successfully toppled Gaddafi’s Libya. Though the veracity of the accusations remains debatable, it nevertheless reinforced negative attitudes towards Clinton.

On a personal level, many people, including prominent Kenyans, have been victims of character assassination campaigns in which hackers gained access to their phones and posted personal and compromising photos on blogs and online forums.

These illustrations indicate that spending on cyber security needs to increase. Moreover, institutions need to understand that the cybersecurity threat landscape has evolved from the initial password guessing in the 90s to highly sophisticated malware, bots and ransomware. Ransomware is a variant of malware and is more commonly used by hackers today.  Some cyber criminals have even resorted to social engineering, where they employ use of deception to manipulate individuals into divulging confidential or personal information that may be used for fraudulent purposes.

Consequently, it is imperative that risk managers and top-level management take the time to understand the dynamics of cybercrime by reviewing analysts’ reports. These reports contain critical insights that can help an organization set up their defense in depth strategy against cyber crimes.

It has also emerged in multiple reports that the key enablers of cybercrime in Kenyan organisations are insiders who have authorized access to the IT infrastructure as well as sensitive information. Rogue elements may sometimes use this access for illegal purposes, while innocent insiders may unwittingly share sensitive information on platforms such as WhatsApp and Facebook, exposing the organization to external threats. This underscores the need for organizations to inculcate a culture for information security awareness and conduct proper background checks during employee recruitment.

Every organization also has distinct vulnerabilities and strengths when it comes to preparedness for cyber-attacks. It is therefore imperative that organizationsproactively engage cyber security professionals who can conduct penetration tests to identify vulnerabilities and propose mitigating controls. A survey by the Kenya National Bureau of Statistics and the Communications Authority of Kenya (CA), shows that 83.1 per cent of public sector institutions do not even have mechanisms to detect intruderswithin their networks.

The government also needs to provide the legislative support to apprehend cybercriminals operating in and outside the country. This calls for cooperation and international legal frameworks between countries as Cybercrime occurs in a virtual environment beyond the borders and beyond territorial law as some hackers purposely operate out of the country to avoid apprehension and subsequent prosecution.

Institutions need to act sooner rather than later as the threat of cybercrime isn’t subsiding anytime soon. The latest Internet usage report from the Communication Authority of Kenya indicates that 74.2 per cent of Kenyans are online, underlining the level of exposure to threat. Furthermore, we have a young, well- educated population which is very tech-savvy and unemployed. Cybercrime has therefore become highly attractive, heightening the likelihood that the threat of cybercrime will escalate in coming years. The need for organizations to ramp up investments in cyber security can therefore not be overstated.

Mr. Tony Olang is the Head of Laser Infrastructure & Technology Solutions, LITES, an ICT and infrastructure subsidiary of CPF Financial Services.

Emotional Intelligence (EQ): The art of creating balance

Emotional Intelligence (EQ)

Its been believed to be more critical than Intelligent Quotient (IQ). The concept of EQ came to the lime light in the 1990’s following ground breaking research by Daniel Goleman. Emotional intelligence is said to help you build stronger relationships, succeed at work, and achieve your career and personal goals ~ Jeanne Segal, Ph.D., and Melinda Smith, M.A. So what exactly is EQ?

What is Emotional Intelligence?

Jeanne Segal, et. al. define Emotional Intelligence (EQ) as the ability to identify, use, understand, and manage emotions in positive ways to relieve stress, communicate effectively, empathize with others, overcome challenges, and defuse conflict. Emotional intelligence impacts many different aspects of your daily life, such as the way you behave and the way you interact with others.

“If you have high emotional intelligence you are able to recognize your own emotional state and the emotional states of others, and engage with people in a way that draws them to you. You can use this understanding of emotions to relate better to other people, form healthier relationships, achieve greater success at work, and lead a more fulfilling life.” Jeanne Segal, et. al.

Emotional Intelligence consists of four attributes:

So why would you consider EQ to be that important to your success in career and life?

Why is Emotional Intelligence (EQ) so important?

As we know, it’s not the smartest people that are the most successful or the most fulfilled in life. You probably know people who are academically brilliant and yet are socially inept and unsuccessful at work or in their personal relationships. Intellectual Intelligence (IQ) isn’t enough on its own for one to be successful in life. Yes, your IQ can help you get into college, but it’s your EQ that will help you manage the stress and emotions when facing your final exams.

Emotional Intelligence affects:

1. Your performance at work. Emotional Intelligence can help you navigate the social complexities of the workplace, lead and motivate others, and excel in your career. In fact, when it comes to gauging job candidates, many companies now view Emotional Intelligence as being as important as technical ability and require EQ testing before hiring.
2. Your physical health. If you’re unable to manage your stress levels, it can lead to serious health problems. Uncontrolled stress can raise blood pressure, suppress the immune system, increase the risk of heart attack and stroke, contribute to infertility, and speed up the aging process. The first step to improving Emotional Intelligence is to learn how to relieve stress.
3. Your mental health. Uncontrolled stress can also impact your mental health, making you vulnerable to anxiety and depression. If you are unable to understand and manage your emotions, you’ll also be open to mood swings, while an inability to form strong relationships can leave you feeling lonely and isolated.
4. Your relationships. By understanding your emotions and how to control them, you’re better able to express how you feel and understand how others are feeling. This allows you to communicate more effectively and forge stronger relationships, both at work and in your personal life.

Is all this information much ado about nothing? Can you raise your level of EQ? Or is it a hopeless situation you find yourself in, unable to change your circumstances?

The good news is that YES, you can definitely raise your level of EQ, here is how:

How to raise your Emotional Intelligence

All information to the brain comes through our senses, and when this information is overwhelmingly stressful or emotional, instinct will take over and our ability to act will be limited to the flight, fight, or freeze response. Therefore, to have access to the wide range of choices and the ability to make good decisions, we need to be able to bring our emotions into balance at will.

Memory is also strongly linked to emotion. By learning to stay connected to the emotional part of your brain as well as the rational, you’ll not only expand your range of choices when it comes to responding to a new event, but you’ll also factor emotional memory into your decision-making process. This will help prevent you from continually repeating earlier mistakes.

To improve your emotional intelligence—and your decision-making abilities—you need to understand and manage your emotions. This is accomplished by developing key skills for controlling and managing overwhelming stress and becoming an effective communicator.

Developing Emotional Intelligence through 5 key skills:

There are 5 key skills that can be employed to developing and boosting Emotional intelligence (EQ). These skills focus on stress reduction and communication and can be learned easily. These include:

Contributor: Sospeter Thiga BA, MBA, CPA

Sospeter Thiga is a Risk Management practitioner in East Africa and is currently the Group Head of Risk and Compliance at CPF Financial Services Limited. Thiga has over 12 years’ experience in Risk Management, Strategic Planning and Financial Planning and is passionate about effective Strategy implementation through adequate Risk Management practice. He holds an MBA in Strategic Management and a Bachelors of Economics from the University of Nairobi. He is a Certified Public Accountant of Kenya.


Government should introduce tax incentives to encourage saving for Retirement.

By Hosea Kili, Group Managing Director, CPF

The government will be presenting its proposed budget for the year 2017/18 in the coming weeks and many Kenyans will be eager to see the policies government will put in place to spur economic growth. According to the 2015 published RBA Industry Report, the pension industry had Ksh. 814.11Billion in assets under management and reports project thatby close of 2016, the industry will boast of approximately Ksh.1 Trillion in assets under management, a 25 percent growth in value and almost twice the size of the Insurance Industry Investments (Q2, IRA Industry Report, Ksh. 485.27 Bn). The pension industry contribution to the country’s economic growth is therefore significant and therefore important in developing and implementing policies that catalyze penetration and inculcate a saving culture.

Current statistics show that approximately18.2 percent of the formal working population actively save towards their retirement while the informal sector lags behind in spite of innovative solutions such as the mbao pension plan and the CPF M-pension designed to target micro savings.In 2016, the banking sector experienced perhaps its most challenging year yet following a review of the Central Bank lending Rates and the requirement to review and realign their business models in view of those changes. This has in turn led the banks to implement staff rationalization, downsizing/rightsizing programs resulting in a significant increase in overall unemployment levels in the country. That notwithstanding the current harsh economic times hasalso eroded the purchasing power of the lower and middle class to the point where they need to access their savings to stay afloat.

The foregoing puts a lot of pressure on the government especially from the social security perspective, which is not limited tojust providing retirement benefits but health benefits, maternity protection, employment injury and disease protection (workers’ compensation), survivors’ benefits, disability coverage, family benefits, and unemployment protection in line with ILO convention No. 102 of 1952. With 42% of the population currently living below the poverty line, and low penetration levels, a growing gap in income inequality,high levels of dependency, and a weakened social fabric across the country, leaders at all levels of our society have an enormous task ahead to address the myriad of challenges that Kenyans face today.

Globalization has necessitated the need to realign the pension sector to factor the changing ecosystem within the job market where employers are engaging employees on shorter contract terms and on project need basis. For the employee this negates the practicality of formal retirement schemes and in addition to this, the investment vehicles adopted by retirement schemes cannot maximize investment returns. Policy makers should therefore consider a framework in which contributors to pension schemes can choose their investment vehicles based on their risk appetite and capacity. Such new policies should ultimately be geared towards encouraging workers in both formal and informal sectors to contribute to pension schemes to save for their retirement.

While the government seeks to increase its tax base, consideration should be made to lower the taxes currently being paid by retirees. Currently, lumpsum payments are tax exempt up to Ksh. 60,000 (per year contributed) and monthly pension tax-exempt limit is Ksh. 25,000. Increasing these thresholds will increase the capacity of the retired to make meaningful investment with their funds and thus contribute to economic growth and development; while the government achieves its overriding objective of ensuring social security for all as provided for under the constitution.

The move by government last year to allow the set up of post-retirement medical schemes was indeed a commendable and a progressive move. In addition to this development,Pension funds were allowed to invest up to 10 percent of their portfolio in private equity and venture capital funds licensed by the Capital Markets Authority (CMA) and more recently, participate in the derivatives market with a view to generate higher returns for pension schemes, which is ultimately passed on to the pensioners.
Taking cognizance of the current budget deficit, it is paramount for policy makers to consider adopting measures that promote investment into home grown investment vehicles by pension funds. There is also dire need to revive industries that were left to collapse in the past, and encourage through a well laid out incentives policy, the setting up of new industries in the country. Only then can we bridge the growing gap of income inequality and youth unemployment in the country.

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